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Graybar Electric SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Graybar Electric managers to do a situational analysis of the company . It is an important technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Graybar Electric is facing in its current business environment.
The Graybar Electric is one of the leading companies in its industry. Graybar Electric maintains its dominant position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the firm such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework enables an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Graybar Electric to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The main purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Graybar Electric strengths, and eradicate its weaknesses.
Step by Step Guide to Graybar Electric SWOT Analysis
Strengths of Graybar Electric – Internal Strategic Factors
As one of the leading organizations in its industry, Graybar Electric has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Graybar Electric are –
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- Strong Brand Portfolio – Over the years Graybar Electric has invested in building a strong brand portfolio. The SWOT analysis of Graybar Electric just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Good Returns on Capital Expenditure – Graybar Electric is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Automation of activities brought consistency of quality to Graybar Electric products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Superb Performance in New Markets – Graybar Electric has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
- Strong distribution network – Over the years Graybar Electric has built a reliable distribution network that can reach majority of its potential market.
- Highly skilled workforce through successful training and learning programs. Graybar Electric is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
Weakness of Graybar Electric – Internal Strategic Factors
Weakness are the areas where Graybar Electric can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
- The profitability ratio and Net Contribution % of Graybar Electric are below the industry average.
- High attrition rate in work force – compare to other organizations in the industry Graybar Electric has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Graybar Electric has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of Graybar Electric
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Graybar Electric is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
Opportunities for Graybar Electric – External Strategic Factors
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Graybar Electric.
- The market development will lead to dilution of competitor’s advantage and enable Graybar Electric to increase its competitiveness compare to the other competitors.
- New trends in the consumer behavior can open up new market for the Graybar Electric . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- The new technology provides an opportunity to Graybar Electric to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Graybar Electric in other product categories.
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Graybar Electric’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Graybar Electric to capture new customers and increase its market share.
Threats Graybar Electric Facing - External Strategic Factors
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Imitation of the counterfeit and low quality product is also a threat to Graybar Electric’s product especially in the emerging markets and low income markets.
- Rising raw material can pose a threat to the Graybar Electric profitability.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Graybar Electric
- Liability laws in different countries are different and Graybar Electric may be exposed to various liability claims given change in policies in those markets.
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
Limitations of SWOT Analysis for Graybar Electric
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Graybar Electric
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Graybar Electric
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Graybar Electric managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Graybar Electric
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
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References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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